(Kitco News) – Mon Oct 24—Comex December gold futures were modestly higher Monday morning as the market ekes out a minor pattern of higher highs and higher lows within its recent consolidation phase.
After spiking to the major Sept. 26 low at $1,535 an ounce, the gold market has crawled to higher highs at $1,585 on Sept. 29, $1,596.60 on Oct. 5 and $1,604.70 on Oct. 20. However, daily Bollinger bands have narrowed in recent sessions, which is an indication of reduced overall volatility in the gold market, as the near term trend is neutral to slightly positive.
The market never breached its major long-term 200-day moving average support on the late September price plunge, which keeps the longer-term technical trend firmly in the bullish camp. Momentum indicators are not showing any strong signals currently as the market languishes between support at $1,585 and $1,700 for now.
Terry Gabriel, technical strategist at Ideaglobal in New York, remains overall bullish on the gold market, but he does see potential for another downside test before the bulls re-focus firmly on the retest of the all-time high at $1,923.70 hit in early September.
“Obviously, the market has been lateral over the past month,” Gabriel said. “I still see risk of one more dip down to the $1,550/1,520 area. But, then I’m look for gold to bottom. I would look for a double bottom and then a return to the August/September highs, though that could take a number of months,” he added.
Shifting out to the weekly continuation chart for Comex gold futures, weekly stochastics are still trending lower. Stochastics are a widely watched momentum indicator. “The weekly stochastic has not yet reached sufficiently low levels to establish a firm low. I expect a test of the [price] low that will wash the market out,” he explained.
Gabriel pointed to the $1,550/1,520 zone as the “critical support” area that traders should monitor.
Near term, Gabriel said “I would look to be a buyer on dips into the $1,500s, as long as $1,520 is not violated.” He did offer a caveat and warning “a weekly close below $1,520 would suggest a much deeper bear market and we could go down another $100.”
Conversely, on the upside, Gabriel added that “an immediate thrust above $1,705 would likely signal a resumption of the advance to challenge the summer highs if the market gets through $1,735.”
Shifting over to the platinum market, the January Comex platinum contract has etched a bottom for now on the daily chart at the Oct. 5 $1,434.50 level. That day the market etched a bullish reversal on the daily chart as the market hit a new sell-off low, but reversed to close higher on the day.
Since then, a traditional buy signal has been seen on the daily relative strength index (RSI), a momentum indicator. The RSI has climbed above the 30% level from so-called “oversold” levels. The platinum market has etched a higher high on the daily chart—another positive technical signal.
Overall, a minor near-term bottom has formed. In order to confirm a larger intermediate term type of low, the January platinum contract would need to scale key near term resistance at the Oct. 17 high at $1,583.60.
Unless that high is scaled, the recent gains will merely be corrective to the overall downtrend off the late August high.
Kitco News-October 24, 2011